One investor likes NRG Energy and is using a highly unorthodox strategy to establish a long position in the electricity-generation company.
optionMONSTER's Heat Seeker tracking program detected the purchase of 11,660 June 25 calls for about $1 and the sale of an equal number of March 21 for about $0.80. Volume was more than 18 times the open interest at each strike, indicating that a new position was implemented.
Owning calls and selling puts essentially gives the investor a double-long position because he or she will make money to the upside but face losses to the downside. The unusual aspect about this particular trade is that it uses different expiration months, which provides three more months to profit to the upside. (See our Education section for more on how you can turn time into money using options.)
NRG is trading at $22.66 this afternoon, up about 1 percent on the day and almost 50 percent in the last six months. The stock has been rallying back from long-term lows and has benefited from its plan to save costs by merging with rival Genon.
Total option volume in NRG is 9 times greater than average so far today, according to the Heat Seeker.
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